Access to Credit and Stock Market Participation

52 Pages Posted: 17 Apr 2015 Last revised: 3 Jun 2016

See all articles by Serhiy Kozak

Serhiy Kozak

University of Maryland - Robert H. Smith School of Business

Denis Sosyura

Arizona State University

Date Written: November 13, 2015


We exploit staggered removals of interstate banking restrictions to identify the effect of access to credit on households’ stock market participation and asset allocation. Using micro data on retail brokerage accounts and proprietary data on personal credit histories, we document two effects of the loosening of credit constraints on households’ financial decisions. First, households enter the stock market by opening new brokerage accounts. Second, households increase their asset allocation to risky assets and reduce their allocation to cash, consistent with a lower need for precautionary savings. The effects are stronger for younger and more credit constrained investors. Overall, we establish one of the first direct links between access to credit and households’ investment decisions.

Keywords: stock market participation, interstate banking, household finance, credit constraints

JEL Classification: D10, D12, G11, G21

Suggested Citation

Kozak, Serhiy and Sosyura, Denis, Access to Credit and Stock Market Participation (November 13, 2015). Ross School of Business Paper No. 1276, Finance Down Under 2016 Building on the Best from the Cellars of Finance, Available at SSRN: or

Serhiy Kozak

University of Maryland - Robert H. Smith School of Business ( email )

7621 Mowatt Ln
College Park, MD 20742
United States


Denis Sosyura (Contact Author)

Arizona State University ( email )

Tempe, AZ 85287-3706
United States


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